The Cato Institute is calling on the US government to eliminate capital gains taxes on Bitcoin and other cryptocurrencies, arguing the current tax framework undermines their viability as everyday money. Nicholas Anthony, a policy scholar and research fellow at the libertarian think tank, published the argument in a detailed blog post released Wednesday. The supporting evidence appears in the cited X post.
Anthony warned that capital gains tax obligations discourage spending crypto on goods and services, push users toward long-term holding, and bury law-abiding citizens in compliance paperwork.
His report frames the issue not just as a tax burden but as a structural barrier to meaningful currency competition in the United States.
The Cost of Buying Coffee With Bitcoin
Anthony put the compliance burden in stark terms: purchasing a coffee every day with Bitcoin can generate more than 100 pages of tax filings annually. Under current IRS rules, spending crypto triggers a taxable event because digital assets are classified alongside stocks and real estate as capital assets, a framework confirmed by investment manager VanEck.
That classification means every transaction, no matter how small, requires users to calculate the gain or loss relative to their original purchase price.
Anthony described the situation bluntly: “The only thing worse than getting robbed would be having the robber demand endless forms about the money they are taking from you.”
His preferred solution is outright abolition of capital gains taxes. But he also outlined narrower alternatives, including removing CGT only on foreign currency and crypto transactions to, in his words, “take the government’s thumb off the scale and let competition be the true decider of the best money.”
Alternative Fixes and Their Trade-offs
A more targeted approach, removing CGT only on purchases of goods or services, was flagged by Anthony as an improvement but not a clean fix. Requiring users to prove each transaction qualifies would, he noted, still create its own compliance headache.
A de minimis exemption, where taxes only kick in above a set spending threshold, was also identified as a possible middle ground worth exploring.
The urgency behind Cato’s push is backed by growing crypto adoption at the consumer level. A 2025 survey by the National Cryptocurrency Association found that 39% of US crypto holders had already used digital assets to buy goods or services. Separately, academic publisher Springer Nature identified roughly 11,000 merchants worldwide currently accepting Bitcoin as payment, according to BTC Map data.
Cato Institute members have testified before Congress on crypto policy in the past, giving the think tank a direct line to legislative conversations in Washington.
Whether this latest report moves the needle on Capitol Hill remains to be seen, but it adds a structured policy argument to a debate that has gained momentum alongside broader deregulatory discussions in the current Congress.
Not Financial Advice: This article is for informational purposes only. Crypto investments are highly volatile. Always do your own research.
